MAHABIR PRASAD RUNGTA V. INCOME TAX APPELLATE TRIBUNAL

T.A./19/2002

AI Insights

The case revolves around a tax appeal by Mahabir Prasad Rungta against the order of the Tribunal which sustained various additions to his undisclosed income following a search and seizure operation under section 132 of the Income Tax Act, 1961. The primary legal issues pertained to the evidentiary value of loose sheets of paper found during the search and the applicability of section 34 of the Indian Evidence Act. The Tribunal had earlier reduced some of the additions made by the Assessing Officer, but the major heads of undisclosed income were upheld. The High Court's decision focused on the interpretation of the relevant sections of the Income Tax Act and the evidentiary status of the documents seized.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 748819 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 09-01-2014
• Assessment Year: misc
• Other Referred Cases: Additional Commissioner of Income Tax, Bombay City-I Vs. Lata Mangeshkar, Central Bureau of Investigation Vs. V.C.Shukla & Ors.
• Laws Referred To: Income Tax Act, 1961, Indian Evidence Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: DEEPAK ROSHAN
• Assessee Lawyers: B PODDAR
• Keywords: Block assessment; Loose Sheets; Rebuttable presumption; Search and seizure; Undisclosed income
• Section: 132; 158BC; 132(4A); 158B

Judgement Text

"1 IN THE HIGH COURT OF JHARKHAND AT RANCHI Tax Appeal No.19 Of 2002 ----- Mahabir Prasad Rungta Appellant Versus Office of the Commissioner of Income Tax (Appeals), Ranchi & Another Respondents ----- For the Petitioner: Mr.B.Poddar, Senior Counsel For the Respondent: Mr. Deepak Roshan ---- PRESENT HON’BLE THE CHIEF JUSTICE HON’BLE MR.JUSTICE APARESH KUMAR SINGH CAV on 3rd January, 2014 Pronounced on 9th ,January, 2014 ----- R.Banumathi,C.J. The assessee has preferred this appeal, being aggrieved with the order dated 24.1.2002 passed by the Tribunal in IT (SS)A No.65(Pat.) 2001. 2. Search and seizure operations were conducted on 27.10.1997 at the premises of the assessee under the provision of section 132 of the Income Tax Act, 1961. Notice under section 158BC of the Act was issued to the assessee on 20.11.1998 calling upon him to file his returns within a period of 45 days. The assessee filed the returns for the block period disclosing undisclosed income of Rs.6,51,321/-. The Assessing Officer completed the assessment under section 158BC and had assessed the undisclosed income at Rs.40,75,868/-, vide assessment order dated 26.10.1999. 2 Aggrieved by the said order of assessment, the assessee preferred an appeal before the Commissioner(Appeals), who allowed the appeal in part, vide order dated 15.10.2001. Not satisfied with the order of the CIT (Appeals), the assessee preferred second appeal to the Tribunal claiming that the CIT(Appeals) was not justified in sustaining an addition of Rs.3,76,600/- under the head of house rent; an addition of Rs.2,27,396/- under the head of educational expenses; an addition of Rs.2,91,000/- under the head of Misc. Payment to other persons and an addition of Rs.5,80,000/- under the head of other payment. Regarding undisclosed House Rent of Rs.3,76,600/-, the Tribunal granted further relief of Rs.1,20,000/- and sustained balance of Rs.2,56,600/- under the head undisclosed House Rent. The Tribunal confirmed the order of CIT(Appeals) on other heads. 3. Undisclosed House Rent As per the lease agreement between the assessee and the landlord regarding the first-floor of the House rented by the assessee, the monthly rent was fixed at Rs.6000/-, whereas from the seized document no.6, the Assessing Officer noticed that the assessee had paid rent @ Rs.11,000/- per month for the period from November, 1993 to October, 1995 (24 months = Rs.2,64,000/-); @ Rs.17,000/- per month for the period from November, 1995 to March, 1996 (5 months = Rs.85,000/-) and @ 3 Rs.20,400/- per month for the period from April, 1996 to October, 1997 (19 months = Rs.3,87,600/-), totaling Rs.7,36,600/- and after deducting the amount of Rs.6000/- per month for 48 months, i.e. Rs.2,88,000/-, the balance of Rs.4,48,600/- was calculated as undisclosed house rent. The Assessing Officer observed that the rented premises was in the heart of the city of New Delhi at Safdarjang Enclave and the rent is not likely to be Rs.6000/- per month and that to be it would not remain fixed for all the four years. On the basis of the document no.6 seized during the search, the Assessing Officer made addition of Rs.4,48,600/-. 4. CIT (Appeals) accepted the contention of the assessee that as per the lease agreement dated 17.4.1997, rent was payable @ Rs.11,000/- per month from 1.4.1997 to 31.3.1998 for the first-floor and based on the document, the Assessing Officer should have allowed a further sum of Rs.72,000/-. CIT(Appeals) held that the total deduction allowable was not Rs.2,88,000/- but Rs.3,60,000/- and the total disallowable amount would come to Rs.3,76,600/- and granted relief of Rs.72,000/- to the assessee. 5. In appeal before the Tribunal, on perusal of the document no.6, it was noticed that the document no.6 nowhere contained an entry to the effect that the rent from November, 1993 to October, 1995 for the first-floor portion was paid at the rate of Rs.11,000/- p.m. Pointing out that 4 the lower authorities were mis-directed concerning contents of the document and they reached the wrong conclusion, the Tribunal calculated disallowance under the head, “House Rent” at Rs.2,56,600/- as against Rs.3,76,600/- confirmed by the CIT(Appeals) and thus, granted further relief of Rs.1,20,000/- to the assessee under this head. 6. Unexplained Educational Expense of Rs.2,27,398/- On the basis of loose-sheets towards the educational expenses of the children of the assessee, an addition of Rs.2,27,398/- (Rs.1,81,278+Rs.46,118/-) was made. The Assessing Officer added the total expenses on estimate basis for the assessment years 1994-95, 1995-96, 1996-97 and 1998-99, considering the entire expenses as undisclosed, amounting to Rs.1,50,000/- and therefore, made total addition of Rs.3,77,396. 7. Before the CIT(Appeals), the assessee contended that it is a block assessment and that the Assessing Officer has not been empowered to make addition on estimate basis and the income should have been assessed on the basis of seized document and nothing more. Accepting the contention of the assessee, CIT(Appeals) held that it is a block assessment and Assessing Officer has not been empowered to make addition and he could not travel beyond the seized documents while making the assessment of block 5 period and deleted the addition of Rs.1,50,000/-. The Tribunal confirmed the order of CIT(Appeals). 8. Misc. Payments of Rs.2,91,000/- Addition of Rs.2,91,000/- made on the basis of diary entries and as per the seized documents, payments were made for Mandir, Hindi Teacher, Bhuaji, Puja, Fruit, Rajasthan, Masoori etc. CIT(Appeals) and the Tribunal confirmed the addition made by the Assessing Officer. 9. Other Payments of Rs.5,80,000/- Payments made as per seized document no.2 to MP Cells, HP Cells, VNS,HPS, P.P.Pali, addition of Rs.5,80,000/- was made and the said addition was confirmed by the CIT(Appeals) and also by the Tribunal. 10. Being aggrieved by the order of the Tribunal, the assessee has preferred this appeal, raising the following substantive questions of law:- (A) Whether an assessment order regarding undisclosed income passed on the basis of loose sheet of papers has no evidentiary value? (B) Whether section 34 of the Indian Evidence Act renders a loose sheet of paper regularly kept in the course of business not sufficient by itself to charge any person with liability? 11. Learned Senior Counsel, Mr.B.Poddar, contended that the assessment order regarding undisclosed income is 6 based on loose-sheets of papers and without anything to show their genuineness and writer being not available; therefore, no evidentiary value could be attached to those documents. Learned Senior Counsel further submitted that under section 34 of the Evidence Act, loose-sheet of papers are inadmissible in evidence and the additions made merely on the basis of loose-sheets without further corroborating evidence is not justified. The main contention of the assessee is that the additions made merely on the basis of loose-sheets is not justified and the Revenue has to bring some corroborative evidence to show that as per the entries made in the loose-sheets, the assessee has earned income out of it, which is undisclosed. In support thereof, the appellant placed reliance on the decision rendered in the case of Additional Commissioner of Income Tax, Bombay City-I Vs. Lata Mangeshkar reported in [1974] 97 ITR 696 (Bom). 12. Learned counsel, Mr.Deepak Roshan, appearing for the Revenue submitted that special procedure is contemplated for search and seizure and as per section 158B(b) “undisclosed income” of the block period is inclusively defined and loose-sheets recovered during seizure ought to be taken as “other documents” and they cannot be merely termed as loose-sheets. Learned counsel further submitted that under the provision of sub-section 7 (4A) of section 132, law raises presumption concerning the correctness of the documents (seized) and the said presumption is rebuttal and the assessee has not adduced any evidence rebutting the presumption raised under section 132(4A). 13. We have carefully considered the submissions advanced by the counsel for the parties. 14. Section 158B is a definition section explaining the basic concept of block period and “undisclosed income”. In section 158B(b), “undisclosed income” of block period is inclusively defined. Section 158B(b) reads as under:- “158B(b) “undisclosed income” includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act or any expense, deduction or allowance claimed under this Act which is found to be false.” 15. Often entries are made by businessmen in chits/loose sheets. During search, if such chits/loose sheets are found, such chits/loose sheets may be regarded as “documents” within the meaning of section 158B(b). The loose sheets seized during the search sometimes contain valuable information and those loose sheets are to be regarded as “documents”. 8 16. Section 132 is a code in itself. The section, considered as a whole, shows that it has its own procedure for the search, seizure, determination of the point in dispute, quantum to be retained and also the quantum of the tax and interest on the undisclosed income. The object of introduction of section 132 is to prevent the evasion of tax, i.e. to unearth the hidden or undisclosed income or property, and bring it to assessment. It is not merely an information of undisclosed income but also to seize money, bullion etc. representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties etc. 17. Section 132(4A) enables an assessing authority to raise a rebuttable presumption. Section 132(4A) reads as follows:- “132(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed – (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.” 9 18. Sub-section (4A) was inserted by the Taxing Laws (Amendment Act, 1975) with effect from 1.10.1975 to permit the presumption to be raised in the circumstances mentioned therein. Before insertion of sub-section (4A), onus of proving that books of accounts, other documents, money, bullion, jewellery etc. found in possession or control of a person in the course of search belonged to that person was on the Income Tax Department. Sub-section (4A) of section 132 enables an assessing authority to raise a rebuttal presumption that books of account, money, bullion, documents etc. belonged to such person; the contents of such books of account and other documents are true and that the signatures and every other part of such books of account and other documents are signed by such person or are in the hand writing of that particular person. The words in sub-section (4A) are “may be presumed”. The presumption in sub-section (4A) is, therefore, a rebuttal presumption. 19. It is not in dispute that the lease agreement entered into between the assessee and the landlord concerning the first-floor of the premises at Safdarjang Enclave, New Delhi, was in existence for the said period. The documents identified as document no.6 contained entries regarding higher rent paid for the said premises for various periods. Based on the entries, the Assessing Officer and the 10 CIT(Appeals) arrived at the concurrent findings of fact that higher rent was paid for the rented premises. The Assessing Officer observed that the rented premises was in the heart of the city of New Delhi at Safdarjang Enclave and the rent is not likely to be Rs.6000/- per month and that to be it would not remain fixed for all the four years. 20. Learned Senior Counsel appearing for the assessee, placing reliance on the decision the case of Central Bureau of Investigation Vs. V.C.Shukla & Ors. reported in (1998) 3 SCC 410 that merely on the basis of the entries in loose sheets without any corroborative evidence, there could not be any addition, made submission that the loose-sheets ought not to have been accepted without any further corroborative evidence. It must be mentioned that since loose-sheets seized are documents within the meaning of section 158B(b), there is presumption raised under section 132(4A) regarding the documents seized. 21. In the light of the presumption under section 132(4A), the assessee ought to have produced other documents to disprove the entries made in the loose sheets, but the assessee has not adduced any material for rebutting the presumption, we do not find any substantial error in the addition made towards undisclosed House Rent. 11 22. Based on the document no.6 referring to the entries, the Tribunal granted relief of Rs.1,20,000/- to the assessee and the same is justified. In so far as other heads, the Tribunal confirmed the order of the CIT(Appeals). When there was no satisfactory explanation for the loose sheets discovered during search, the addition upheld by the CIT (Appeals) and the Tribunal are justified. 23. As pointed out earlier that there is rebuttable presumption under section 132(4A) that the documents belonged to the person and the contents being true and the assessee has not adduced any rebuttal evidence to show that the entries made in the diary/loose sheets were not income in the hands of the assessee. Since the lower authorities recorded concurrent findings of fact and the Tribunal upheld the additions, we do not find any reason warranting interference with the order of the Tribunal. The appeal is dismissed and the substantive questions are answered against the assessee. (R.Banumathi, C.J) (Aparesh Kumar Singh,J) Dey/NAFR "